Increased co-operation to tackle tax evasion

Switzerland, Austria and Luxembourg announced today (13 March) that they will increase co-operation with foreign tax authorities in order to crack down on tax evasion.

Ministers from the three countries said that in the future they will share information on demand with foreign authorities carrying out tax investigations, but that this will mean neither the end of traditions of banking secrecy nor automatic data exchange.

They said the commitment would be enshrined in double-taxation agreements to be concluded with partner countries and the change would bring the countries into line with Organisation for Economic Co-operation and Development (OECD) guidance on tax co-operation, known officially as the “model tax convention”.

Josef Pröll, Austria’s finance minister, said the decision would “kill two birds with one stone”. He said: “Banking secrecy will remain as it is…at the same time we can withdraw our reserves against article 26 of the model convention, by which we fulfil all the standards of transparency set by the OECD."

The Swiss government said that it would exchange information in response to “specific and justified” requests and that the new co-operation would not require changes to Swiss law. Hans-Rudolf Merz, the Swiss finance minister who currently chairs the federal cabinet, said there would be “no fishing expeditions” by foreign authorities looking for data and that “banking secrecy is maintained”. He said automatic exchange of information, as practised by almost all EU member states, “would never be acceptable” to the Swiss government.

The three countries have been under pressure in recent weeks to announce concessions on sharing of banking information because of a push from some other countries to crack down on tax evasion. A meeting of EU members of the G20 on 22 February called on the OECD to draw up a list of unco-operative tax havens prior to the G20 summit of developed and developing countries on 2 April.

Austria and Luxembourg currently opt out of EU rules on the exchange of banking information between tax authorities (opting instead to pay a so-called ‘withholding tax’). Switzerland, which has signed up to the legislation bilaterally, applies a similar exemption. Merz said that the EU agreement would need to be renegotiated to take account of today’s announcement.

A spokesman for the OECD told European Voice that it had “reported to the G20 on the outcome of its current assessment of which financial centres are implementing agreed standards of transparency and exchange of information”.

“It has also reported on progress made in developing measures that countries can take to respond to those financial centres that are failing to make progress,” he said. The spokesman added that the information did not take the form of a blacklist. Merz confirmed that Switzerland had been named by the OECD as a country not fulfilling the agreed standards.

Liechtenstein announced yesterday that it will adopt OECD standards on transparency and information exchange. Andorra declared yesterday that it would eliminate strict banking secrecy for tax purposes by November.